Oil Market Outlook
Oil prices rose in anticipation of tighter supplies as winter approaches, while Opec and its allies agreed not to deviate from their plan for only modest production increases.
West Texas Intermediate (WTI) crude rose $3.47 to close at $79.35 per barrel. Brent gained $3.11 to $82.39 and Dubai crude averaged $81.40. Thaioil forecasts that WTI this week will trade between $76 and $82, and Brent between $79 and $85. Prices are expected to remain high as economic activity picks up in countries with high Covid vaccination rates. Natural gas shortages, meanwhile, are pushing up demand for oil for heating and industrial use. However, US crude output has rebounded to levels seen before Hurricane Ida, and crude inventories may climb, pressuring prices. Among the factors expected to influence trade:
■ Several power plants in Asia have switched from gas to oil as gas prices have surged to a 10-year high. Gas demand is especially high in China, which is seeking to curb fossil fuel emissions at a time when it was already facing a shortage of coal for power generation.
■ Opec+ producers agreed last Monday to raise aggregate output in November by 400,000 barrels per day despite requests from major consumers including the US and India for bigger increases to keep high fuel prices in check. And while sources say Opec and its allies are happy with prices at current levels, they could decide at their next meeting on Nov 4 to pump more if they think the market is too unbalanced.
■ US crude inventories in the week to Oct 1 rose by 2.3 million barrels, against forecasts for a drop of 400,000, to a total of 420.9 million, as crude output rose by 200,000 bpd from a week earlier to 11.3 million bpd, a rebound to pre-Hurricane Ida levels.
■ Russia’s foreign minister and Iran’s energy minister both signalled last week that there will be negotiations on the Iran nuclear deal with six world powers soon. A date for the next round of talks has not yet been set, but a successful outcome could lead to sanctions being lifted on Iranian oil.
■ World Health Organization data show that average daily Covid cases for the week ending Oct 6 fell by 22% from the average for September, amid the increasing number of vaccinated populations. The improving Covid situation has prompted several countries to relax travel restrictions, which helps boost oil demand recovery.
■ Economic indicators to watch include an International Monetary Fund meeting, Chinese and US retail sales, US consumer prices, Chinese trade figures for September, and euro zone industrial production.